While Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) has succeeded in convincing most of the prominent analysts, and probably also the Mylan NV shareholders, that an acquisition of Mylan by Teva will generate value, Actavis CEO Brenton Saunders believes that a Teva-Mylan deal will destroy value.
Saunders was interviewed yesterday by Bloomberg, and asked about Teva's attempted takeover of Mylan, and Mylan's attempted takeover of Perrigo Company (NYSE:PRGO; TASE:PRGO). "A hostile takeover of global companies usually destroys value. I wish Teva success, and I wish Mylan success in its attempt at a hostile takeover of Perrigo. In the end, however, these deals depend on people, who are concerned with performance, continued business momentum, and discovering new drugs. When you're in a hostile takeover situation, it creates bad blood," Saunders said. "It takes years to assimilate a company after bad blood like that, and as you know, integration usually fails. In my opinion, a hostile takeover only increases the risk of failure."
Saunders knows the industry and its mergers and acquisitions craze, but keep in mind that he is CEO of a competitor, with different interests than those of the companies involved in the proposed mergers. Actavis recently completed a major acquisition of Botox manufacturer Allergan for $70 billion. Actavis rescued Allergan from a hostile takeover by Valeant.
Asked whether Actavis would also rescue Mylan from a hostile takeover by Teva, Saunders said that would be unreasonable, because Actavis's generic business was fully active, and had no need of major acquisitions. "There's a lot of overlap in the Teva-Mylan combination, which could cause value destruction, in addition to the hostile element," he said.
"The world is changing, and Teva's standing is unique"
It was reported yesterday that Mylan was likely to improve its offer for Perrigo by making a fourth price bid, after three previous bids were rejected by the Perrigo board of directors. The most recent bid, 2.3 Mylan shares plus $75 in cash per Perrigo share, as of now reflects a $240 price for the Perrigo share. The Mylan share, however, is being traded at a high value as a result of Teva's attempt to take over the company. Mylan's attempt to take over Perrigo is being perceived as a means of defense against a takeover by Teva, because Teva has made it clear that its bid to acquire Mylan is only valid if Mylan does not acquire Perrigo.
Speaking today at the IATI conference in Tel Aviv Teva CEO Erez Vigodman did not refer directly to the offer to acquire Mylan, but talked about the extensive changes in the industry, and mentioned that 80 mergers and acquisitions had taken place in the pharmaceutical industry over the past year. "The world is changing, and the change is non-linear," Vigodman stated. "The rules of the game are changing, one industry after another. You miss one turn in the race, and you're out of the game."
Vigodman noted the importance of differentiation, and the ability to find a special place in the industry. He cited several trends that have been changing the rules of the game in the pharmaceutical realm in recent years, including demographic and digital trends and more intense competition. He predicted that the next big wave of change would be driven by the changes experienced by the insurers and governments, greater knowledge among patients and their desire to devote time and money to being healthy, and changes in the competitive environment.
With respect to Teva, Vigodman said, "We took steps to close the gaps in early 2014, with our feet on the ground - strengthening our business base, managing the lifespan of the important products, and building organic growth engines - and with our head in the clouds - building a new future for Teva." He remarked that Teva's progress in each of these areas was reflected in both the company's business results and its share, which had enabled the company to mark a lower bound for its profit per share ($5 per share in 2016). "This will enable us to grow in 2016 and accelerate our momentum, all based solely on organic measures."
Vigodman also noted that strengthening Teva's business base would enable the company to make acquisitions. "Teva's has a unique standing in the industry, with capabilities in both generic and specialty drugs. The combination of these two worlds is a unique opportunity for us. We're changing Teva's business model, step by step," he explained.
Published by Globes [online], Israel business news - www.globes-online.com - on May 12, 2015
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